Tags: moodys | distressed | retailers | recession

Moody's: Distressed Retailers Now at Great Recession Level

Moody's: Distressed Retailers Now at Great Recession Level

(Brett Critchley/Dreamstime.com)

By    |   Tuesday, 28 February 2017 08:11 AM

Moody's is reporting that the number of distressed retailers around the country have increased to Great Recession levels, tripling over the past six years.

Charlie O'Shea, vice president of Moody's Investor Services, said the increase in distressed retailers comes after a long period of low interest rates, a signal to sponsors to go after targeted companies.

"Moody's-rated U.S. retailers rated Caa or Ca today make up just over 13 percent of our total rated retail portfolio, which is the highest level since the Great Recession, when this group comprised 16 percent of the portfolio," O'Shea said. "And the increase comes at the same time as the broader universe of Caa rated companies is likewise growing."

To compound matters, Moody's said that 19 of the Caa/Ca-rated companies in the agency's retail portfolio owe roughly $5 billion in debt through 2021, with about 40 percent of this due by the end of 2018 and a spike during 2019.

"Retailers are in the midst of a secular shift to online sales led by juggernaut Amazon.com Inc. and that's forcing many of them to spend heavily on their e-commerce operations," said Ciara Linnane, corporate news editor for MarketWatch. "At the same time, mall traffic has slowed dramatically as consumer behavior changes, forcing many to discount heavily, hurting profit margins."

Barron's reported that Claire's, J. Crew, Tops, and rue21 are all part of Moody's 19 Caa/Ca listed companies after they took on debt to fund acquisitions. Sears Holdings, Nine West, and Payless also are on Moody's list.

"As they struggle to survive, distressed retailers can take more desperate measures, including highly promotional pricing that can border on irrational," said O'Shea. "This leaves stronger firms with the choice of either competing in a race to the bottom, or giving up sales in order to preserve margin."

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Moody's is reporting that the number of distressed retailers around the country have increased to Great Recession levels, tripling over the past six years.
moodys, distressed, retailers, recession
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2017-11-28
Tuesday, 28 February 2017 08:11 AM
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